Mobile money could help shut down state graft


 MOBILE money systems not only lift people out of poverty, they can also aid in closing down opportunities for state corruption, improving the lives of all.

The World Bank estimates that more than 2-billion adults globally do not have a bank account and remain outside the formal financial sector. In developing economies, only 41% of adults have bank accounts.

Being "banked" offers people certain protection. It enables them to save more effectively, distribute money to dependants more efficiently and across distance, and can be a path to accessing regulated, affordable credit and employment in the formal economy.

It is often a major stepping stone in the transition out of poverty, making it a primary goal for many philanthropic organisations.

SA enjoys relatively high banking penetration for a developing nation, with seven out of 10 adults banked and little gender disparity. Lower down the economic ladder, though, 57.8% of the poorest 40% of South Africans are banked, and only just more than half of young adults.

Two of the biggest drivers of inclusion figures — up from 45% of the population in 2004 — were the introduction of Mzansi accounts (low-fee transactional bank accounts) and later the South African Social Security Agency (Sassa) initiative.

According to the FinScope 2014 report, a third of the banked population have Sassa cards (linked to Grindrod Bank accounts) through which they receive state benefits.

Only 14.4% of South African adults have mobile-based accounts, according to the World Bank — and the GSMA Mobile Economy Africa 2015 report pegs this even lower, at 7.6%. In Kenya, where 75% of the population is banked, 58% have mobile accounts and more than 50% of adults use their mobile devices to pay utility accounts.

Digital payment systems allow for a saving of up to 90% on the cost of transactions, according to Sacha Polverini, a Gates Foundation senior programme officer and a panellist at the MasterCard Innovation Forum in Kuala Lumpur, Malaysia, last month.

MasterCard’s divisional president for sub-Saharan Africa, Daniel Monehin, says digital payment systems are not only a gateway to financial inclusion but are a solution to two of Africa’s most notorious problems: corruption and inefficient state administrative systems.

THE Kenyan government recently rolled out a system that allows citizens and businesses to apply and pay for certain services and licences through a mobile-ready website (, taking much cash out of the system. Visitors to the country can also prepay for their visas on the site.

"We suggested that this is how (the Kenyan government) can close all the loopholes — and those loopholes were like black holes, massive and with a life of their own," Monehin says.

"If you (go digital), you can address that, and they jumped on it. The solution was already in the market; we just plugged them into it. All of those payments are now driven off that platform and it is card-agnostic."

In Nigeria, identity cards are now linked to a mobile wallet system backed by a financial institution. "Everybody 16 and above who now gets a national ID, gets the electronic wallet," explains Monehin. "It is often difficult for a solution to survive from one administration to another, but this one has.

"President (Muhammadu) Buhari has been enrolled in the programme and said everyone should get this. A lot of what the government has promised to do, they found that this is a platform to deliver it. It is a platform to fight corruption, for transparency and accountability."

This top-down approach could help in mainstreaming digital payment systems (which have traditionally been consumer-or individual-focused products driven by small start-ups), while increasing financial inclusion.

"In terms of financial inclusion, I would start my thinking from the government, and then SMEs (small and medium-sized enterprises), and then the individual," Monehin argues. "If you are able to convert those first two entities, which are 90%-95% cash — similar to the individual — if they disburse benefits electronically, they will now drive electronic behaviour down the pipe.

"You cannot solve the one in isolation, while the government doesn’t change its behaviour. And governments are willing to change."

MASS digital payment adoption also has significant implications for businesses, SMEs, mobile network operators and mobile money operators.

According to the Pew Research Centre, in 2013, 29% of South Africans and 68% of Kenyans polled reported that they "regularly make or receive payments" on phones.

In Ivory Coast — a project driven by the government, MasterCard, the Gates Foundation and the Omidyar Network — saw school-registration fees move to a digital payment system. According to the case study report on the initiative, published by GMSA, in 2014-15, "99% of school-registration fee payments (were) made digitally; 94% of which are made via mobile money".

The benefits were considerable but, in particular, schools saw fees collections increase and early payments increase; while mobile money operators saw a boost in the volume of transactions, lifting an existing seasonal revenue stream, and, in some cases, creating a new revenue stream.

The number of registered and active users of mobile money accounts also grew considerably. The report says the move to a digital payment system contributed to "drastically reduced lost payments, fraud and theft".

IN CAMEROON, Kenya, Mauritius, the Philippines, Rwanda, Tanzania and Uganda, governments accept certain tax payments through mobile money systems.

Although digital payments and mobile point-of-sale devices do incur small fees — that are largely absorbed by businesses or end-users, unlike cash — these are often considerably lower than those charged by traditional banking-backed point-of-sale options.

Increased acceptance of digital payments could help formalise the informal sector and bring small vendors into the financial fold.

As the cost of point-of-sale ownership drops, adoption increases and businesses reap the benefits, such as access to larger and more remote markets.

Monehin acknowledges that a "cashless" Africa is a long way off, but doesn’t doubt the role that digital payment and mobile money will play in the market.

"More and more spend their whole lives on (mobile devices)," he says. "We’ve gone from $600 point-of-sale devices to $50m point-of-sale (mobile point-of-sale), and my prediction is that we are going to a no point-of-sale environment, where there is no need for an acceptance device because you already have one — your mobile."